It might not be the first time that you are hearing about payday loans. You probably have taken one or more payday loans before. But do you know more about them? Well, I’m here to polish the way you think about payday loans.
Payday loans online come through for you if you cannot get to the next payday with your current earnings. You will get the funds faster in your account, primarily within one business day or a few hours.
However, there are five interesting facts that you should know about payday loans before you get to apply for one.
But first, what are payday loans?
Payday loan has got lots of definitions in the past. But today, I will give you a unique meaning that you will understand directly.
A payday loan is the type of short-term loan that you apply for a short-term need. For example, you will not take a payday loan to buy a car or a mortgage. Instead, you will do things with a payday loan are short-term needs such as vehicle repair, paying grocery bills, or house renovation.
Now, what are the five facts about payday loans?
1. They have very high-interest rates
When I say high-interest rates, I mean it. Payday loan lenders do not hide the fact that they sell their loans at a very high cost. And they are not apologetic about it.
The lenders say that they deal with high-risk clients, thus the high-interest rates. In most instances, those who apply for payday loans have bad credit scores and cannot get loans from banks or other lenders.
In contrast to the high-interest rates, payday loan lenders never lack borrowers. On the contrary, people usually flood their offices and websites looking for a short-term payday loan.
So, if you need a payday loan, you should be comfortable with APRs starting from 390%. So you could imagine what will happen when you don’t payback.
2. Once you skip a payment, the lender doubles the interest
Yes, that’s how payday lenders will deal with your first indiscipline. If you missed the first repayment, tell me whether you will pay another doubled interest. So if you want to take a payday loan, think again if you are not planning to repay them.
However, some lenders will be good enough to grant you a grace period without interest. But that can only happen if you communicate with them prior.
3. You pay the loan amount plus interest all at once
That’s one reason you should take a payday loan that you can comfortably repay on the agreed time. There are no negotiations about paying payday loans.
The lender requires you to repay the whole loan amount plus interests in the next payday. In most cases, payday loans are two weeks old in their maturity.
So once you take a payday loan, ensure that you budget your income accordingly and plan before taking the loan. This criterion will help you to manage the payday loan repayment.
4. They don’t require you to have a good credit score
This particular facet about payday loans keeps the lenders busy with borrowers. The borrowers do not conduct credit checks on the borrowers, and that’s why they get so many borrowers.
As you might have noticed, many individuals have landed on the wrong side of credit scores, limiting their ability to take loans. And that’s why they are looking for loans that do not conduct credit checks.
So if your credit history is not that good, and you need fast lending, then payday loans might be of great help to you.
5. No effect on your credit score
Taking a payday loan will not impact your credit score even if you pay generously according to the repayment schedule. This is because payday lenders do not update your prepayment information on the three credit bureaus.
You cannot rebuild your credit score using payday loans. However, you can turn to other credit builder loans to help you with cash and build your credit score.
However, whenever you fail to honor the repayment terms, there might impact your overall credit score. Furthermore, payday loans do not sound as good news to your other creditors.
My take
If you exhaust all options of getting a loan, then go ahead and take a payday loan. But it would help if you only took what you could play without struggling or ruining your budget.
However, for a long-term solution, focusing on creating more income sources and money will not be a problem in the future.
